Why It’s Smart to Choose a Credit Union for Your Private Student Loans

College tuition rates are at an all-time high. In the United States, one year’s average cost of attendance at a private, four-year, nonprofit college is more than $55,000. At a public, four-year, in-state college, the cost is nearly $30,000 per year.

If you multiply those costs over four years, the total can feel overwhelming. That’s why students like you turn to private loans when scholarships, grants, and financial aid aren’t enough to cover the cost.

Because they are not-for-profit, a local credit union may be your best bet for finding a personalized loan that meets your needs with a payment plan you can manage after graduation. Here at Lanco Federal Credit Union, we offer several college funding options through our partnership with LendKey. This partnership allows members of Lanco Federal Credit Union to access private student loan financing with attractive rates and features.

Credit unions like ours make paying for college more affordable and flexible for students, graduates, and their families. Whether you are working toward a bachelor’s degree or pursuing a trade, there are several lending options available for you. Let’s get into the differences between these options for your school loans.

The Difference Between Federal and Private Student Loans

There are two types of student loans: federal and private. Before applying for private loans, all students should first apply for federal loans using the Free Application for Federal Student Aid (FAFSA). These loans generally have the lowest interest rates, which are always fixed.

When the government subsidizes these loans, the borrower does not need to pay back the interest while in school. Unsubsidized federal loans, on the other hand, do accrue interest while you are in school, but payments aren’t due until after you graduate.

You do not need to pass a credit check or have a creditworthy cosigner to qualify for most federal student loans. Conversely, Federal PLUS loans, used by graduate students and parents, do require a credit check. Note that government student loans require you to be enrolled at least half-time as an undergraduate student (6 credit hours), so they aren’t viable for people who are working through their degree more slowly.

The maximum loan amounts available for federal student loans are limited by the year of student you are and whether or not you have family support. Even when students get the maximum amount available, they often still need to find a private loan to cover their remaining costs.

Private student loans can come from banks or credit unions. Both offer loans with fixed or variable rate options and look at students’ credit scores when determining interest rates. Students with higher credit scores will likely qualify for lower interest rates.

Many lenders will also offer a lower interest rate if the loan cosigner (such as a parent) has a high credit score. Private lenders also offer repayment plan options, including in-school deferment and automatic loan payments.

Why You Should Borrow Your Private Student Loans from a Credit Union

Credit unions are not-for-profit organizations that convert their profits into savings and benefits for their members—for example, by offering higher dividend rates on savings products and charging lower loan interest rates and fees. Plus, many credit unions tend to be more local and community-minded than banks, so they can also offer you a more personalized banking relationship. In other words, you are not just a student loan number to a credit union. You are a member.

When you choose a credit union for a student loan, your membership will give you access to many other benefits that the credit union provides, such as free checking and student credit cards. As a student, look for a credit union with student loan options that offers you free mobile services and an extended branch network that’s available at home or school, like at Lanco Federal Credit Union in Lancaster County, PA.

Before signing, students should compare multiple loan options when shopping for student loans from a credit union. Experts recommend that you compare loan origination fees, membership requirements, repayment plans, and interest rates. You should also determine when repayment must begin, whether it is shortly after signing for the loan or when you are done with school.

Thinking ahead to after graduation means you should also find out if there are penalties for early repayment, what penalties exist for late or missed payments, and if there are any payment protection programs should you become unemployed. If you plan to attend graduate school, you should also consider whether you can defer your student loan payments until after you complete your graduate program. Otherwise, you’ll have to pay on your undergraduate loans while you’re still in graduate studies.

When to Apply for a Credit Union Student Loan

Unlike federal student loans with annual application deadlines, you can come to a credit union for student loan help at any time. Ideally, it is best to apply about a month before you’ll need to access the funds so that the credit union has time to process your application, certify your college enrollment status and tuition expenses, and set up the disbursement of your loan. However, this timeline can vary by lender, so it’s always good to apply early to avoid delays.

Generally, private lenders, such as credit unions, will disburse loan funds at the start of the semester.

Find Competitive Student Loan Rates at Lanco Federal Credit Union

Even families who have saved for college may need loans to cover the rising cost of tuition, room and board, and other fees. When you need a private student loan in Lancaster County with great rates, be sure to check out the competitive student loan options from Lanco FCU.

Our friendly loan officers can help you find a loan option to cover the gap between what you can get from federal loans, grants, and scholarships and what college costs. When you turn to a credit union for student loan services, you are turning to your community for support!

We also offer loan consolidation options for graduates paying back their loans and looking to save on interest costs over the long term. Contact us today to discuss your financial goals.

Learn More About Our Student Loan Options

Editor’s Note: This blog post was originally published on Nov. 5, 2020. It has since been updated for accuracy and comprehensiveness.